Being the subject of a sales and use tax audit is a fact of life for many large corporate taxpayers. For other taxpayers, an audit comes as an unwelcome surprise. Predicting what makes a company more vulnerable to a sales and use tax audit can prove to be a valuable exercise. Knowing what triggers an audit can help taxpayers avoid or prepare for the inevitable.
States generally have a system for selecting taxpayers for audit, and they will use a variety of selection methods within that system. Some taxpayers are selected regularly because of their size, sales volume, or the complexity of their returns. Others may be chosen because of a specific event. For example, closing a store in a particular location, bankruptcy, or the dissolution of the business may trigger an audit.
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